U.S. taxpayers were slightly less likely to face an IRS audit last year, an
analysis issued Tuesday says.
The IRS acknowledged that the number of audits of individuals dropped last year,
but examinations of taxpayers with incomes over $200,000 and over $1 million
rose.
IRS audits dropped 5.3% in federal fiscal year 2012 to 1,481,966 audits of
individual tax returns, based on IRS data analyzed by the Transactional Records
Access Clearinghouse.
The number of IRS employees fell 4.7% to 90,280 in fiscal 2012, according to the
report. And the number of audits per 1,000 returns fell from 11.1 in fiscal 2011
to 10.3 in fiscal 2012.
Because of an increase in the number of federal tax returns filed, chances of an
IRS audit of an individual tax return fell 7%, TRAC says.
Additionally, TRAC reported the IRS plans to devote 18% less effort auditing
businesses with assets of $10 million or more than two years ago. Compared with
federal fiscal year 2011, the IRS also projects a 14% drop in the time available
for revenue agents to conduct the large business audits, TRAC reported.
The analysis did not account for this year's federal budget sequestration, a
budget-cutting process that could further reduce IRS audits.
The decline in the audit rate for individuals was only slightly higher than the
reduction in the IRS' overall staffing level. The personnel drop continued a
long-term decline that has reduced IRS staffing 23% over the last two decades,
TRAC reported.
At least in part, the IRS has compensated for the staffing decline by doing
fewer face-to-face audits. The agency has also used computer technology to
identify unreported income by comparing what taxpayers said they received with
amounts reported on financial payment forms.
These less-costly procedures "may well be adequate to deal with many simpler tax
situations," TRAC said. But the research organization added that it's less clear
"that this computerized audit process can provide adequate coverage for
wealthier individuals, many of whom have complicated business or investment
income."
"How will both the giant corporations and individual taxpayers respond as the
IRS presence recedes?" TRAC asked.
"The IRS is committed to running a balanced enforcement program," the IRS said
in a written statement. "Our audits of large corporate tax returns remain at
high levels by historical standards. In fiscal 2012, we audited more than 10,700
returns of large corporations representing more than 17% of businesses in this
category. The IRS will remain focused on this area in 2013 during a challenging
budget period."
